March 22, 2019

A bench of Justice S.J. Mukhopadhaya, Chairperson & Justice A.I.S. Cheema, Judicial Member held that the company & the directors have to be treated equally while imposing fine for delay in filing Cost Audit Report.

The appeal was filed against the order of National Company Law Tribunal, New Delhi. There was a delay in filing of Cost Audit Report by the defaulting Company for the years 2013-14, 2014-15 & 2015-16.

The Registrar of Companies initiated prosecution under Section 233-B(11) of the Companies Act, 1956. The Company moved an application for compounding of offence. However, NCLT imposed fine on the Company as well as its directors.

Ankit Totuke, Advocate appearing for the appellants argued that NCLT imposed maximum fine of ₹1 lakh on the directors as prescribed under Section 148(8) read with 147(1) of the Companies Act, 2013.

However, on the contrary, the fine imposed on the Company was only 20% of the maximum fine, i.e. only ₹1 lakh out of a maximum of ₹5 lakhs.

The NCLAT, in reference to Section 147(1) of the Companies Act, 2013, stated “Considering the above provision & the fine as imposed we find substance in the argument of the learned counsel for the appellants that the Company & the Directors have not been treated equally.

Thus, the Court modified the impugned order & reduced the fine imposed on the directors to 20% of the maximum fine. [Goyal Vegolis v. Registrar of Companies, Company Appeal (AT) No. 419 of 2018, dated 19-03-2019]

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